Long associated with the top job at the International Monetary Fund (IMF), Minister for Finance Paschal Donohoe has surprised commentators by taking up a senior role with the other major global financial institution, the World Bank.
Donohoe notified Cabinet on Tuesday that he planned to step down as finance minister and as a TD for Dublin Central, effective immediately, to take up the position of senior managing director at the World Bank.
He is due to start in his new role next Monday.
The senior managing director role is effectively the bank’s number two position under the president, who is currently Ajay Banga.
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Donohoe will take over from Dutch-Austrian national Axel van Trotsenburg, who is retiring from the role after a 37-year stint at the Washington-based bank.
As he will no longer be Ireland’s Finance Minister, Donohoe will also have to resign from his position as president of the Eurogroup, which he has held since 2020.
He is said to have informed senior department officials of his intentions on Monday afternoon in advance of a World Bank board meeting in Washington to agree his appointment.
According to the bank’s annual report from 2023, Donohoe’s predecessor received a tax-free salary of $475,230 (about €410,000) plus living expenses of $156,529.
While the head of the IMF is typically a European and appointed by European governments, the head of the World Bank is appointed by the US president, reflecting Washington’s senior shareholding position in the development bank, in which it has a 16 per cent stake.
“In some ways the presidential role is a nominal role, it is the four managing directors that run the place,” a senior source said.
The bank has more than 20,000 staff, including 7,000 in Washington, DC, across 144 locations globally.
“The biggest risk is [that] he’s an outsider and there’s a steep learning curve,” the source said.
“Also the culture of the place is a minefield to navigate,” they added, noting that the outgoing managing director was there for decades and “knew everyone and everything”.
Donohoe will work alongside World Bank managing director of operations Anna Bjerde, a Swedish national, who is married to Carlow-born financial analyst Gareth McDonald.
In contrast to the IMF – which focuses on short-term financial stability – the World Bank is concerned with long-term economic development and poverty reduction.
In his new role, Donohoe will oversee the core development work of the bank, which provides financial aid and technical advice to low-income countries.
He will also be responsible for managing partnerships with other international agencies, such as the UN and the IMF, and will represent the bank at G7 and G20 meetings. He will lead the bank’s engagement at the annual Cop climate meetings.
Donohoe will also serve as the bank’s chief knowledge officer.
Unlike the World Bank president, who is appointed for a five-year term, the managing director roles do not typically have a fixed term.
Each of the World Bank’s 189 member countries has a governor and an alternate governor – typically filled by the member state’s finance minister and its central bank governor.
The World Bank’s decisions are made by the president in conjunction with his board of 25 executive directors. Voting power is dominated by the United States, followed by Japan (which has a 6.84 per cent shareholding), China (4.42 per cent), Germany (4 per cent) and both France and the United Kingdom, each with a 3.75 per cent shareholding.
Announcing the appointment, Banga said Donohoe brought more than 20 years of public service, “and knows first-hand how good policies can unleash private capital mobilisation, boost growth and generate jobs”.
“He also brings extensive knowledge of how investors, private sector, financial companies, technology firms and others operate – from his near decade of experience in the private sector. This combination will be invaluable at ensuring the World Bank Group delivers more impact at scale,” he said.
